Record Results Fueled by Savvy M&A Moves
Supreme PLC’s latest financials tell a compelling story of strategic reinvention. While a 6% jump in Adjusted EBITDA to £40.5m and 4% revenue growth to £231.1m are impressive on their own, the real narrative lies in how they’ve navigated regulatory headwinds and diversified their portfolio. The acquisitions of Typhoo Tea and Clearly Drinks weren’t just box-ticking exercises – they’ve fundamentally reshaped the group’s earnings profile, adding £40m of annualised non-vape revenue almost overnight.
The Financial Engine Room
Let’s crack open the headline numbers:
- Margin Magic: Gross profit surged 16% to £73.7m, with margins climbing 300bps to 32%. This isn’t luck – it’s the result of bringing manufacturing in-house (Clearly Drinks’ 40% margins are a prime example) and ruthless operational efficiency.
- Cash Conundrum? Don’t let the 90% drop in adjusted net cash (£1.2m) spook you. This reflects £25.6m deployed in acquisitions – strategic capital allocation rather than distress. Crucially, operating cash flow remained robust at £25.1m.
- Dividend Delight: Shareholders get a 10% dividend hike to 5.2p per share. That’s not just generosity; it signals board confidence in sustainable cash generation.
Acquisitions: The Growth Accelerant
Supreme’s M&A playbook deserves study. They’re not chasing vanity projects – they’re hunting neglected assets with turnaround potential, leveraging their distribution muscle:
Typhoo Tea: Brewing a Comeback
Snapped up for just £10.2m from administration, this iconic brand had been mismanaged into £4.6m losses. Supreme’s already stabilised it, achieving £6.1m revenue and positive EBITDA contribution within four months. The plan? Reignite mainstream distribution, bring manufacturing back in-house, and exploit cross-selling across their 10,000+ retail outlets.
Clearly Drinks: Manufacturing Muscle
The £15.6m acquisition wasn’t just about brands – it was about capabilities. That 150,000 sq ft automated facility is a platform for new product development (think protein-infused wellness drinks). Crucially, they’ve already secured listings for Clearly’s brands with major existing clients – synergy in action.
Division Deep Dive: Navigating Choppy Waters
Vaping: Pivot, Don’t Panic
Yes, the UK disposable vape ban clipped revenues (£54.1m vs £70.7m). But look deeper: non-disposable vape sales grew 8%, and margins expanded. Supreme saw this coming, managed stock brilliantly (avoiding nasty write-downs), and is now a government advisor on vaping taxation. Their pod and rechargeable transition? Executed with military precision.
Drinks & Wellness: The New Powerhouse
Revenue doubled to £48.8m. Sci-MX (acquired for £1.4m in FY22, now delivering £10m revenue) exemplifies Supreme’s brand revival magic. Combining this with Typhoo and Clearly Drinks creates a formidable category – expect serious cross-selling fireworks in FY26.
Electricals: Steady Eddy
A 6% revenue dip to £53.4m reflects a tough market, but it remains a reliable cash generator. Supreme’s outperforming the sector decline – a testament to their retailer relationships and logistical edge.
Outlook: Confidence Brewing
Management’s guidance is refreshingly clear: FY26 trading in line with consensus (£236m revenue, £36.5m EBITDA). The focus is clear:
- Organic Growth: Cross-selling Typhoo/Sci-MX/Clearly Drinks across their vast network is low-hanging fruit.
- Manufacturing Leverage: Maximising ROI on those new facilities.
- Selective M&A: Their war chest is rebuilding, and the pipeline is active. Expect more earnings-enhancing deals.
The Verdict: More Than Just Vapes
Supreme’s transformation is palpable. They’ve deftly handled a regulatory earthquake in vaping while simultaneously building a diversified, brand-led FMCG platform with serious manufacturing clout. The record results are impressive, but the strategic repositioning is what truly excites. Trading on a PER just north of 12x? For a business with this growth trajectory and M&A optionality, that feels like a potential mispricing. One to watch closely as the drinks and wellness integration plays out.
Chadha and team are playing chess, not checkers. Their next move should be fascinating.
